Health costs: Talks, balks

If state employees end up paying a higher share of their health insurance costs next year, they won't be alone.

A national survey released last week by the Kaiser Family Foundation showed that workers nationwide who have family coverage are paying almost $4,000 this year for premiums and out-of-pocket health care costs. That’s about $482 a year more than they paid in 2009, a 14 percent increase in a single year, the survey showed.

Other data collected by the National Conference of State Legislatures in Denver showed that the employee share of health insurance costs held steady from 2006 to 2009, on average. But the overall trend for most states is to put more health-cost burdens onto workers over time – whether through higher premiums or through shared costs such as co-pays and deductibles, NCSL health expert Dick Cauchi said.

“That is a universal trend in virtually every setting – large private employers (and) small private employers. In that sense, states are acting like large employers,” Cauchi said last week. “Clearly, there are other factors. Negotiations with employees are one factor.”

In Washington, Gov. Chris Gregoire’s labor negotiators proposed two weeks ago to hold the state’s monthly contribution to workers’ insurance plans even at an average $850 per worker. (The money covers health, dental, life, disability and other insurance.)

But to keep a lid on the state’s costs and avoid increasing employees’ out-of-pocket costs, labor unions must accept a whopping increase in their workers’ monthly share of insurance premiums – to 26 percent, up from 12 percent. That is because medical inflation is expected to drive up insurance costs.

The Washington Federation of State Employees, which is bargaining on behalf of about 40,000 workers, has rejected the governor’s offer. It would require workers to pay the most for coverage since they began sharing premium costs in January 1996.

“When you look at what has been proposed by this administration, it is similar to what you’d see in Georgia, Alabama and Mississippi when you look at total compensation,” federation executive director Greg Devereux said Friday, adding that those states were “like Third World countries. They skew the averages.”

In fact, NCSL data showed that the 12.3 percent share of insurance costs paid by Washington workers for full-family coverage was lower than the average 18 percent paid by workers in other states in 2009. Washington workers also paid less than 5 percent for individual coverage compared with an average of nearly 8 percent in 47 states NCSL surveyed.

But whatever the differences, state workers covered by Washington’s Uniform Medical Plan now pay $41 a month for single coverage and $123 for full family coverage, and those rates would more than double under the governor’s plan. The Uniform Medical Plan is the state-run program that is the most popular of all options and is used by more than half of the 336,000 workers, dependents and retirees in the state system.

The state Health Care Authority says UMP members, on average, pay $86.50 a month for insurance today and $840 a year for out-of-pocket medical and pharmacy costs.

The proposal would add about $500 a year in premiums for single coverage and $1,500 for family coverage. And it would come at a time when no pay raises are expected for two years.

Workers’ out-of-pocket costs already went up between $550 and $1,250 a year in January, according to state estimates, and the federation says the 26 percent demand is just too much.

Devereux said government has alternatives – including tapping into health account reserves. The union workers also have made big sacrifices – including doing without cost-of-living raises in the past two years with the prospect of no raises in the next two. In addition, a few thousand state jobs have been cut, putting more work on many of the workers left behind, and temporary layoffs are taking the equivalent of 10 days’ pay from one-third of the state government work force over the next year.

Gregoire’s budget director, Marty Brown, said the state doesn’t have money to be more generous as it approaches a $3 billion shortfall in the next budget cycle. As for the union’s counter-offer to use reserves, he said health coverage accounts are too lean to tap in the way lawmakers did in the past.

The result is that the state would need $268 million to cover the increases the union is talking about, which means it would have to cut funding from other programs to pay for the benefits, Brown said in an interview.

“It’s $268 million less of something,” Brown said.

The two sides are far apart, according to Brown and the federation, and they face an Oct. 1 deadline for wrapping up agreements and getting them ratified by about two dozen unions. But the deadline is for agreements that require specific dollar amounts for new spending in Gregoire’s December budget.

If no agreement is reached, the state’s $850 offer will stand and workers will be stuck with higher costs – likely in out-of-pocket costs.

Devereux said the state should be trying to treat its workers better under the circumstances. He noted that a salary survey done for the state Department of Personnel in May found more than half of comparable Washington employers in the private and public sectors paid 100 percent of employee health premium costs.

He also pointed to data the union’s national affiliate compiled that shows Oregon, Indiana and Iowa pay workers’ entire health benefits cost, and two more – Minnesota and Montana – pay all the cost for the individual employee’s coverage.

But how much a state employee pays for health insurance varies widely state by state – from Oregon’s complete coverage to Hawaii’s 50 percent-plus worker share for individual or family coverage.

The premium split often varies inside a state depending on the kind of plan and whether it’s for employee-only coverage or family coverage, according to the NCSL’s August 2009 survey. For instance, NCSL data show that state government in Mississippi paid just $343 toward a worker’s coverage, on average, in 2009 and let the worker pick up the rest, regardless of the level of coverage.

That meant Mississippi workers paid just 5 percent of the premium for individual coverage but nearly 63 percent of the cost of family coverage.

Cauchi of the NCSL said he cautions strongly against using averages too literally to explain health costs. He said there is much variation and complexity in state health data that make it hard to generalize.

Even so, data compiled from states in August 2009 showed the average employee share for family care in 47 sampled states was 18 percent, and the employer share was 82 percent. But for individual coverage, it was closer to 8 percent for workers and 92 percent for employers.

Sen. Joseph Zarelli of Ridgefield and other Republicans in the Legislature have argued that the state should ask employees to pay at least 18 percent of health care premiums. He recently called Gregoire’s opening offer on contract talks a good start.

But majority Democrats have been resisting calls to demand higher premiums from workers. And in this year’s legislative session, they put in $65 million to cover rising costs rather than increase the worker share.

Brown, the governor’s budget director, said the state thinks its contract offer is within the bounds of what Washington employers are doing – including small firms and larger employers. Brown said the state did not rely much on other states’ health-funding practices in calculating the 26 percent employee share for its premiums proposal.

Instead, the proposal – delivered by top state negotiator Diane Leigh and her team to two dozen labor unions Aug. 24 – was based on what it would cost to continue coverage of workers and families with no new state contribution and no increases in workers’ co-pays and other out-of-pocket costs, Brown said.

In fact, to keep the workers’ share of premiums at 12 percent, the governor’s proposal would require deductibles in the popular Uniform Medical Plan to shoot up from $250 a year to $850. Co-insurance rates would double to 30 percent, and out-of-pocket maximums for nonprescription costs would climb from $2,000 to $5,000, according to data Devereux provided from the bargaining table.